Business finance for steel fabricators

Why fabrication ties up so much cash

Structural and architectural steelwork has one of the longest cash-conversion cycles in the construction supply chain. You buy plate, sections, hollow sections and consumables when an order is confirmed, then the steel sits in your yard and on the shop floor while it is cut, drilled, welded, fitted and painted or galvanised — work that can run for weeks before a single beam leaves the gate. Only on delivery, or once it is erected on site, do you invoice. The money goes out at order and comes back at the far end of fabrication.

Material is the heavy part of the bill. A confirmed structural package can mean a five-figure steel buy before any value has been added, often with the mill or stockholder wanting payment on or near delivery rather than on extended terms. Meanwhile welders, fitters and fabricators are paid weekly throughout, and the gas, wire, abrasives, paint and galvanising sit on top. Carry two or three contracts at once and the working-capital requirement stacks fast.

Retentions, valuations and the contractor chain

When you fabricate as a subcontractor to a main contractor or principal builder, the same pressures that hit other trades apply — with a heavier materials weighting. Payment usually comes on monthly applications or valuations rather than in one lump, so you fund the steel and the labour and recover it in stages. On top of that, a retention of around 3–5% is commonly held back, often split between practical completion and the end of a defects period, leaving earned profit locked up for months after the steel is in place.

Two further frictions are specific to steel. Mill lead-times and minimum order quantities can force you to commit early and buy more than one job strictly needs, and volatile steel pricing means a package quoted one quarter can cost noticeably more to deliver the next — squeezing margin on fixed-price work. Funding the buy at the right moment, rather than waiting on the previous job's cash, is often what keeps the programme on schedule.

What steel fabricators use funding for

Working capital in fabrication tends to go on a familiar set of pressures:

• Steel for a confirmed order — funding the plate and sections for a structural package before the delivery invoice is paid.
• Fabrication payroll — paying welders and fitters weekly through the build while you wait on a valuation.
• Consumables and finishing — wire, gas, abrasives, paint and outsourced galvanising or shot-blasting.
• Bridging retentions — releasing the 3–5% held back across completion and the defects period.
• Taking a larger contract — saying yes to a job whose upfront steel bill is too big to carry from cash alone.

For longer-life kit — a new saw, drill line, plasma table or overhead crane — asset finance usually spreads the cost more economically. Short-term working capital is best matched to the steel, the labour and the wait, not to machinery you will own for years.

What to weigh up before you borrow

Tie the borrowing to a confirmed order and a clear repayment point. Funding the steel for a contract with a signed order and a credible delivery and payment date is sensible; using short-term money to roll over an ongoing margin problem is not — if fixed-price jobs keep coming in under cost, the fix is the estimating, not more borrowing. Check the package still carries enough margin to absorb the cost of finance after any steel-price movement, since a spike can quietly eat a fixed quote.

Line repayments up against when valuations and the final delivery invoice actually clear, not when they are theoretically due, and keep retention monies in view as money you have earned but cannot yet touch. Look at the total repayable figure rather than a headline rate. This is general information, not advice on your accounts — model it against your own contract values and payment terms, or with your accountant.

How no-personal-guarantee company finance fits

Credicorp lends to the limited company, not to the director — so there is no personal guarantee and your home and personal assets are not pledged against a business facility. As an exempt business lender we provide short-term working capital to UK limited companies, structured around how a fabrication business actually buys steel, adds value and gets paid.

For fabricators that means money that lands when the steel order is placed and clears when the delivery invoice or valuation is paid. A business loan suits a single defined push — the steel and labour for one large structural package. A revolving line such as Credicorp Flex fits running several contracts at once, letting you draw to buy material and repay as each job is invoiced, then draw again for the next order. You can apply online and keep ownership of every contract. If you also do site installation, our construction page covers the same ground from the main-contract angle.